European cloud sovereignty and regulation debate

The European cloud market is navigating a tension between the pursuit of digital sovereignty and the economic costs of migrating away from US-based providers. Data indicates a growing preference for European cloud services for specific workloads, such as AI applications, business process software, and identity management, where data control and legal compliance are prioritized.

However, industry groups and think tanks have raised alarms regarding the financial impact of the European Commission’s proposed Cloud and AI Development Act (CADA). A study by the European Centre for International Political Economy (ECIPE), funded by the CCIA Europe lobby group—which includes members such as Amazon, Google, and Meta—suggests that reducing dependence on American technology could cost the region between 115 billion and 233 billion euros over the next decade.

According to the ECIPE report, these costs would be split between approximately 33.3 billion euros for public budgets and 80 billion euros for private sectors, including banking, energy, and healthcare. The primary drivers are software migration and rewriting, accounting for roughly 69% of the total, while increased cloud service prices account for 30%. These costs are primarily attributed to the necessity for the public and private sectors to migrate systems and rewrite software between 2027 and 2036.

In contrast, the European Commission’s own upper estimate for the impact of the legislation is significantly lower, at approximately 18 billion euros. While proponents of sovereignty warn against ‘lazy trust’—a reliance on global tech giants that makes switching providers difficult—the economic projections highlight significant challenges for businesses and authorities managing the transition.